Module: | Priority Sector, Consumer Protection & Digital Lending
Q111: Which of the following statements is/are correct regarding the tenure, removal, and service conditions of the Internal Ombudsman (IO) under the 2026 Directions?
1. The tenure of the IO shall be a fixed term of not less than three years, and the total tenure (including any extension) shall not exceed five years.
2. The emoluments and facilities of the IO are determined by the Customer Service Committee (CSC) of the Board and cannot be changed adversely during the tenure.
3. The Internal Ombudsman cannot be removed before the completion of the term without the explicit approval of the Reserve Bank of India.
4. The number of Internal Ombudsmen to be appointed is determined by the Customer Service Committee, based on the volume of complaints.
2. The emoluments and facilities of the IO are determined by the Customer Service Committee (CSC) of the Board and cannot be changed adversely during the tenure.
3. The Internal Ombudsman cannot be removed before the completion of the term without the explicit approval of the Reserve Bank of India.
4. The number of Internal Ombudsmen to be appointed is determined by the Customer Service Committee, based on the volume of complaints.
✅ Correct Answer: A
The correct answer is Option A. The governance framework safeguards the IO's stability and independence through strict tenure and remuneration rules.
The IO serves a fixed term of a minimum of three years, with a maximum cap of five years (including extensions). To prevent executive pressure, the emoluments are set by the Customer Service Committee (CSC) of the Board and are protected from adverse changes during the tenure.
Furthermore, the volume of complaints dictates the number of IOs required, a decision also vested in the CSC.
Statement 3 is the specific error: while the IO is protected from arbitrary removal, the authority required for removal before the term ends is the Customer Service Committee of the Board, not the Reserve Bank of India (though the RBI must be informed of vacancies). The Customer Service Committee of the Board is a mandatory high-level committee in every bank comprising members of the Board of Directors, tasked with overseeing the quality of customer service and grievance redressal.
The fixed tenure ensures that the Internal Ombudsman can make decisions against the bank without fear of immediate contract termination.
By empowering the CSC rather than the bank's CEO to set emoluments, the regulations decouple the IO’s salary from the bank's commercial performance.
Adverse changes to service conditions generally refer to reductions in salary, allowances, or rank that would punish the officer for strict compliance.
The requirement to inform the Reserve Bank of India about any vacancy or removal acts as a supervisory check to prevent banks from silencing an active Ombudsman.
Banks with a high density of complaints are often required to appoint additional Internal Ombudsmen to ensure that the quality of case review does not deteriorate due to workload.
The IO serves a fixed term of a minimum of three years, with a maximum cap of five years (including extensions). To prevent executive pressure, the emoluments are set by the Customer Service Committee (CSC) of the Board and are protected from adverse changes during the tenure.
Furthermore, the volume of complaints dictates the number of IOs required, a decision also vested in the CSC.
Statement 3 is the specific error: while the IO is protected from arbitrary removal, the authority required for removal before the term ends is the Customer Service Committee of the Board, not the Reserve Bank of India (though the RBI must be informed of vacancies). The Customer Service Committee of the Board is a mandatory high-level committee in every bank comprising members of the Board of Directors, tasked with overseeing the quality of customer service and grievance redressal.
The fixed tenure ensures that the Internal Ombudsman can make decisions against the bank without fear of immediate contract termination.
By empowering the CSC rather than the bank's CEO to set emoluments, the regulations decouple the IO’s salary from the bank's commercial performance.
Adverse changes to service conditions generally refer to reductions in salary, allowances, or rank that would punish the officer for strict compliance.
The requirement to inform the Reserve Bank of India about any vacancy or removal acts as a supervisory check to prevent banks from silencing an active Ombudsman.
Banks with a high density of complaints are often required to appoint additional Internal Ombudsmen to ensure that the quality of case review does not deteriorate due to workload.